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Sorry for the long preamble:

I'm doing a remodel which involves building a new attached garage. At the same time, I'm replacing the water heater because it is ancient. I have considered a tankless heater, but I'm having trouble justifying it because it seems a lot of people have a lot of trouble, particularly in light of the fact that the water in my area (Willow Glen, San Jose, California) is extreme hard. So in the end, the only pro to me would be that it could be mounted on the exterior of the house to save room in the garage.

Now, part of the design of the new garage is that it is vaulted so that the ceiling is much higher on one side than the other (like 9ft vs 14 ft) and on the high side we have a massive paralam beam running the length of the garage overhead to create a huge loft space for additional storage. This is all on the structural plans. So it occurs to me that if the water heater is in the loft, then there are no pros left to getting a tankless water heater. So finally the question:

Assuming the extra 500lb load for a 50gal water heater is okay according to the structural engineer, is there anything else that would prevent it being up to code to install a water heater in this loft space in the garage?

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I'm not sure about the code constraints, but a few things to keep in mind: you'll need access to the tank for maintenance, and the P&T relief valve needs a discharge pipe that terminates within a foot of the floor. –  Shimon Rura Nov 30 '13 at 15:58
    
Also make sure it has a good drain pan, and flush and check for rust annually. When it lets go, you will have a major mess. Not all leaks nicely drain down the interior of the casing and into the drain pan. If they're properly insulated, pressure will build up and they can spray from any seam. My neighbor was off for a long weekend and the water heater was installed in a utility closet above the garage. It flooded into the bedrooms and then proceeded to leak through the flooring and garage ceiling. Major ruination. –  Fiasco Labs Nov 30 '13 at 18:00

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